below's an interesting opinion piece in the electricity journal on the viability of hydrogen.
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---------------------------------------------- Forget About Liquefied Natural Gas: We Need Diverse Clean Energy Now Woodrow W. Clark II
The Electricity Journal Volume 17, Issue 8 , October 2004, Pages 87-90
Available online 30 September 2004.
Crises breed innovative opportunities. The Chinese even have one word for both. Still, as the summer of 2004 drew to a close, America in general and California in particular, continued to have an energy crisis. To do nothing, or have our heads in Middle Eastern sand, because we believe that "market forces" will meet the demands has now been proven folly. What we do have in America and the world today in terms of challenges and opportunities is a major "paradigm shift"-the change from fossil fuels to clean, renewable fuels. And clean hydrogen is the key.
Public and private plans, programs and mechanisms are needed now. No doubt about it. But choice, and hence diversity in energy supplies, are the critical factors to an environmentally sound future with reliable, clean energy. Basic economics argues that any source of supply must be diversified and subject to civic markets.1 Many well-intentioned proponents, however, propose that the energy shortages of today will be met with "near-term" solutions such as liquefied natural gas (LNG).
Unfortunately, the public policy proponents often do not have all the data or are not fully informed. Instead, they only have access to or knowledge of selected materials provided to them by biased sources. As we shall see below, the option of LNG is not only near-term, but also overly expensive and needlessly prolongs the paradigm shift to clean, renewable energy fuel sources, let alone California's hydrogen economy2 and the more immediate concern for advanced technologies, notably fuel cells, that link stationary and transportation infrastructures.3
Having served recently in California's state government, it is easy for me to understand how current state officials are disinformed due to lack of in-depth historical sources and biased analytical data. As a result, energy bureaucrats in the state administration have put forth many ill-informed and simply wrong assertions about California's energy situation, based on fundamentally flawed hypotheses that run counter to mandated public policy. The most oft-quoted document is the California Energy Commission's (CEC) "Integrated Energy Policy Report,"4 issued on its legally required due date of December 2003. Unfortunately, the debate and discussion over this report came in the middle of California's historic recall election during the summer and fall of 2003. Based on flawed logic and narrow data analysis, the report erroneously recommends in its Executive Summary, among other things:
. Ensure that existing and new natural gas storage capacity have priority for meeting peak demand in the electricity and natural gas systems.
. Coordinate permit reviews with all entities to develop an LNG terminal on the West Coast.
While the Energy Report also calls for advancing the renewable portfolio standard to 20 percent by 2010, it does not offer any financial incentives or government programs to do so. On the other hand, the LNG industry is prepared to spend and invest billions in building LNG facilities along the California (or even the Mexican) coastlines. By the summer of 2004, two international corporations had proposed and were on a fast track pathway to approval for LNG facilities.5
Aside from the matter of the facilities, a fundamental question remains: Where is the LNG supplied? What are the sources of supply in terms of geopolitical concerns and environmental impact? Most proponents point to Australia, Norway, and South America-safe LNG suppliers, goes the argument. However, rarely do they add Indonesia, Siberia, Venezuela, and the Middle East, on the other. Since there is not enough LNG supply to satisfy the increased worldwide demand, the U.S., and California in particular, will be forced to depend upon suppliers in volatile, unsafe, and potentially conflicted regions of the world. That's without even considering the environmental degradation that LNG exploration and drilling causes. Arguing for domestic U.S. supplies violates basic environmental reasoning.
The argument, moreover, that natural gas prices are rising and supplies uncertain is equally questionable. As an investigative study by the Federal Energy Regulatory Commission of the February 2003 "price spikes" issued in July 2003 proved, natural gas supply spikes6 are most often due to "short-term conditions leading to low supply and high demand" (p. 15). Or what some economists have called "the perfect energy storm." The past and current Governor's Office Natural Gas Task Force (now part of the CEC) tracked natural gas prices since the crisis in the winter of 2001 and consistently came to the same conclusions.7 The pattern of price manipulation that was documented and tracked during the California energy crisis from the spring of 2000 to the summer of 2001 can be seen with natural gas.
Of course, we Californians know about "price spikes," because of our struggles with market manipulation during the California energy crisis. However, to claim that more natural gas, especially in the form of LNG, is needed in the state due to continuing higher market gas prices is false. Certainly, if LNG facilities are built, hence temporally increasing supplies until they run out in 20-25 years,8 that may become the case. But it is not the situation now. Natural gas prices are stable if civic markets provide oversight.
The bases of the CEC 2003 Integrated Energy Report (and other reports) however rests upon the past reviews of the energy situation and natural gas supply in California. Again, as these studies fail to consider broader and far more inclusive policy issues, so do those advocating LNG. Moreover these studies rely heavily upon other studies of the same ilk by the CEC, such as the Natural Gas Task Force and its LNG Working Group reports produced monthly since the spring of 2001. This CEC report was issued in July 2003 with reliance upon these same sources of data (usually generated by outside consultants). Nonetheless, the inherit dangers in this and other studies are admitted in the following report disclaimer:
. does not discuss the front end of the LNG supply chain (i.e. the exploration, production and liquefaction of gas from distant and isolated locations), LNG economics, or the features and permitting of small LNG facilitates for vehicle fueling or peak-shaving purposes .(and in addition) the regulation of LNG facility operations, gas pipeline construction and operation, gas quality, or gas prices." (p. 2)
Each of these disclaimed points is a major issue: (1) International conflict, (2) national security, (3) environmental, and (4) hazardous issues are all critical and independent by themselves. Community advocacy groups, multinational corporations, and the CEC all have well-paid consultants, researchers, and lobbyists. These issues may be resolved also in the American presidential election, but past presidential history makes one wonder: Bureaucracies live beyond the changes in political office. Meanwhile, the LNG industry hopes to "educate" and "inform" (i.e. convert) the environmental and larger community to its point of view. It would not be surprising to discover some environmental organizations receiving LNG industry "donations." Nonetheless, the costs for any LNG facility (on-shore or off-) are estimated by the industry itself to run in the billions. As noted above, private sector proponents and public sector oversight do not include other costs. Why? The reasons are significant.
First the further dependence on fossil fuels such as LNG is not discussed. Do not be fooled. LNG is a fossil fuel, no matter how "clean" it might be positioned in its marketing. And LNG will never be clean in the way that renewable energy sources are clean. California is already far too dependent on natural gas to engage in further fossil fuel dependency. As increasingly more research studies show9 - and as articles such as The Economist's "Beginning the Energy Internet"10 have begun to suggest - the near-future configuration of the energy grid will be far less centralized and far more dispersed. In short, any nation-state, such as California, will have local lower-cost green energy from its renewable resources rather than remaining dependent upon transition lines and long-haul transport systems.
Second, the key to California' s energy independence as observed by past Gov. Davis and advocated by current Gov. Schwarzennegger is to focus on the state's infrastructure and its "diversity" of fuel supplies11 (9). Renewable energy supply has been aggressively supported by both governors through executive orders and renewable energy laws. Every other elected state official and many local communities, including now the largest pension funds in the world, CalPERS and STRS, also argue the case for California's energy independence through environmentally sound technologies and renewable energy generation. Gov. Davis' Office of Planning and Research issued a report on "Strategies for a Comprehensive California Renewable Energy Investment
Plan," from its Interagency Green Accounting Working Group, in October 2002,12 which documented how strategic cost-effective investments in renewable energy today would more than make up for future energy shortages in the state.
Third, the LNG facilities costs are staggering. If the industry with state approval and sanction condones such energy facility costs, then why not direct similar investments to renewable energy generation-both grid and off-grid? The fact is that renewable energy today is on an even faster cost-reduction trajectory than natural gas was 30 years ago. Back then, the costs for natural gas production, transportation, and power generation were high. Renewable energy costs are significantly lower today and coming down even faster (e.g. wind is now on a par, for example, with natural gas),13 and do not depend upon fossil fuel exploration.
Fourth, and perhaps the most disturbing, are the stranded costs for LNG. If, as the argument goes, natural gas supplies are limited today, and hence subject to higher price spikes, then it is easy to see a near-term Economics 101 scenario whereby there will be an oversupply in the short term, leading to either the abandonment or bankruptcy of these environmentally dangerous facilities. Environmental justice and health issues along with the dangers to local communities14 will make LNG facilities a permanent problem, be they on- or off-shore. In the end, industry will turn to government and taxpayers to bail them out or finance their power supply contracts. We have certainly seen that before in recent history.
Finally, the argument that LNG and natural gas is a "transition" to the California Hydrogen Highway may be correct in a narrow way. But the issue is to define the length of time for this transition.15 President Bush, some academic researchers, and misinformed environmentalists believe a hydrogen economy is 20-30 years away. Not true. The transition period is, at most, only five to seven years. Hence, why invest billions in LNG when it is a short-term transitional fuel source?
Just five to seven years? That's the view of the European Union, Japan, major carmakers, international power companies, and regional and local governments.16 In other words, the time cycles for the next generation of hydrogen fuel-cell-powered vehicles, after the current hybrids, are close at hand. This is not fantasy or corporate market hype. Consider the hybrids on the road today at reasonable costs and sold out for months in advance. Not more than four years ago, some companies brought demonstration hybrid models into the marketplace. Today, go to Los Angeles or San Francisco and see hydrogen fuel cell cars in use by local city governments. Looks like the paradigm change is occurring now.